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HomeMy Public PortalAboutResolution No. 224-05 03-08-2005 RESOLUTION NO. 224-05 • A RESOLUTION OF THE CITY OF Richland Hills ~ TEXAS, ENDORSING CERTAIN LEGISLATIVE CHANGES TO S.B.7 SUPPORTED BY CITIES AGGREGATION POWER PROJECT, INC. WHEREAS, the City ofxichland xills ,Texas (City) has historically been active in the process of regulation of electric utilities; and WHEREAS, the City is a member of Cities Aggregation Power Project, Inc. (CAPP) and, as such, made a decision to join with more than 78 other cities to switch its municipal electric accounts from its incumbent provider to a retail electric provider; and WHEREAS, CAPP's experience with the deregulated market and contracts with several different retial electric providers has indicated that the Texas electric retail market has failed to develop into a truly competitive market as envisioned by Senate Bill 7 (SB7) in part because congestion zones within the ERCOT market have allowed certain market players to control enough generation capacity within a given zone to exercise market power to the detriment of customers and non-affiliated retail electric providers; and WHEREAS, retail electric price competition has not successfully reached residential customers in Texas communities with populations less than 40,000; and WHEREAS, the formula established by SB7 to determine the amount to be paid to cities for electric franchise fees is based upon information from 199$ and fails to account for any increases to keep up with inflation, impacting municipalities' revenue and budgets; and WHEREAS, the Public Utility Commission of Texas is considering implementing a nodal market design in ERCOT that would, as currently contemplated, directly assign congestion costs in a manner that will create winners and losers among geographic areas of the state and harm economic development in areas receiving congestion cost surcharges; and WHEREAS, the City endorses efforts proposed by CAPP to modify the electric deregulation legislation to improve competition, implement the original intent of S.B. 7 and reduce costs to the City and its residents. • 1813\01\2005\oth050124gmg THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF • R i r h l a n rl u; i~ c ,TEXAS, THAT: I. The following legislative reforms endorsed by CAPP to limit market power, prevent cost shifting between geographic areas of the state, create effective citizen aggregation and permit annual adjustments to municipal franchise fees be supported by the City: • Require that ERGOT function as one zone or limit the ownership and control of generation within functional markets (ERGOT zones) and require further Commission action to mitigate market control. • Authorize citizen aggregation projects that will permit cities and towns with populations less than 40,000 to aggregate the load of all of their residents that have not specifically asked to be excluded from the aggregation project. Changing citizen aggregation from "opt-in" to "opt-out" will enhance the opportunities for rural residential customers to benefit from deregulation and benefit the entire state by increasing competition. • Tie escalation of electric franchise fee amounts to the Consumer Price Index by permitting municipalities to annually adjust franchise fee amounts by one-half of the annual change to the consumer price index, mirroring a provision already in law for telecommunications franchise fees. • • O ose an cost allocation system of nodal pricing costs that would directly assign Pp Y congestion costs in a manner that is detrimental to economic development. CAPP and STAP question whether ERGOT is capable of handling the massive operational change that creating a nodal market would require and whether the projected benefits are worth the approximately $500 million up-front costs to implement. However, if nodal pricing is instituted then congestion costs should be spread to the entire ERGOT service area rather than increasing electric costs for customers in certain regions of Texas. II. A copy of the resolution shall be sent to the elected lawmakers representing the City's interests in the Texas House and Senate and to the Chairman and legal counsel of CAPP. • 1813\01\2005\oth050124gmg PRESENTED AND PASSED on this 8 day of March , 2005, by a vote of 4 ayes and 0 nays at a regular meeting of the City Council of the City of • Richland Hills ,Texas. ~e~~~~Q~b ~-~~•.3 = M yor Nelda S. Stroder y ~ ~ e~`~ ~ ATTEST: ~ en~r F . ~ ' 1 e 9~. 'm ~ C._. / 1 0 ~ 1 6 1 1~ Secretary Kim Sutter • • 1813\01 \2D05\oth050124gmg